Morning Notes

23/10/2017 Argonaut Morning Note

Market Update & Important Indicators
Stocks extended their remarkable streak of gains Friday. The Dow Jones Industrial Average closed above 23000 for the first time Wednesday, and its fresh high Friday marked the most records in a calendar year for the index since 1995. Earlier this month, the Dow's advance that started in March 2009 became the third-longest bull market in the index's history. The Dow Jones Industrial Average rose 165.59 points, or 0.7%, to 23328.63 on Friday, notching its 53rd record close of 2017. The index's weekly gain of 2% was its biggest since mid-September. The S&P 500 gained 13.11 points, or 0.5%, to 2575.21 on Friday, while the Nasdaq Composite added 23.99 points, or 0.4%, to 6629.05. Both indexes closed at records Friday and notched weekly gains. Corporate earnings have largely driven stocks in the past week. Of the S&P 500 companies that have reported earnings so far, three-quarters have topped estimates, according to FactSet. Earnings season picks up this coming week, as nearly 200 companies in the S&P 500 are scheduled to report third-quarter results, according to FactSet. The U.S. gold price traded lower overnight, falling 0.8% to finish at 1,280.00 US$/oz.

European stocks edged higher Friday, but with traders choosing to err on the side of caution as worries persisted about the Spain-Catalonia standoff over independence for the wealthy region. The Stoxx Europe 600 index rose 0.3% to close at 390.13, led by financial shares. Germany's DAX 30 index closed marginally higher at 12,991.28, and France's CAC 40 added 0.1% to reach 5,372.38. In London, the FTSE 100 closed essentially flat at 7,523.23, paring a bigger advance at the open.

In Asia, Japanese stocks narrowly notched their 14th straight day of gains by climbing less than 0.1%. The Nikkei's winning streak was its longest in nearly 57 years and the index ended Friday at its highest since 1996. Investors however withdrew the most on record from Japanese equity funds in the week ending Oct 18th following a series of multiyear highs for the Nikkei, according to fund-tracker EPFR Global. South Korea's Kospi rose 0.7% to another record closing high amid gains in index heavyweight Samsung Electronics. Hong Kong's Hang Seng Index rebounded 1.2% after falling 2% Thursday, when a warning from the head of China's central bank rattled investors. Taiwan's Taiex bucked the trend, falling 0.3%.

Australian shares overcame early weakness to log an eighth straight gain, the longest streak in 15 months. The S&P/ASX 200 spent much of the day in positive territory and finished up 0.2% at 5907, moving close to 2017's high. The index has risen for three consecutive weeks after lagging global markets this year. The ASX climbed 1.6% this week, helped Friday by utilities and consumer stocks. Meanwhile, BHP advanced 0.5% while the materials sector was flat overall amid the big miner's annual meeting. And Commonwealth Bank outpaced peers, rising 0.3% even as its chairman and CEO were grilled by lawmakers as part of Canberra's biannual review of the country's big lenders.

The London Metal Exchange’s 3-month copper contract traded lower overnight, falling 0.2% to finish at $6,952/t. The other base metals also finished lower. Aluminium prices lost 1% to close at 2,124/t, whilst tin prices dropped 1.4% to 19,657/t. Zinc prices slipped 0.6% to 3,152/t, while Lead prices lost 0.1% to 2,459/t. Nickel prices were flat overnight, closing at 11,671/t.

In this issue
Western Areas (WSA) | Recovery Project opens up new doors | SELL
Market Cap $831m | Current Price $3.06 | Target Price $2.75

Western Areas (WSA) released September Q results with 5.3kt nickel in concentrate production at C1 cash costs of A$2.49/lb (before payability), down 7% and up 3% respectively. The Mill Recovery Enhancement Project (MREP) is well advanced and expected to commence commissioning in Q1 2018. This project will both enhance nickel in concentrate recoveries and produce a higher grade nickel product for the battery market. WSA retains a strong balance sheet with $146m cash and receivables (no debt). Downgrade to SELL based upon valuation grounds.

Recent Contacts & Presentations
Gascoyne Resources Ltd (GCY), Southern Cross Electrical Ltd (SXE), MOD Resources Ltd (MOD), Meteoric Resources NL (MEI), Emmerson Resources Ltd (ERM), Gage Roads Brewing Ltd (GRB), Otto Energy Ltd (OEL), Whitebark Energy Ltd (WBE), MZI Resources Ltd (MZI), Gascoyne Resources ltd (GCY), NTM Gold Ltd (NTM), Novo Resources Ltd (NVO:TSX), Alice Queen Ltd (AQX), Melbana Energy Ltd (MAY), TOX Free Solutions Ltd (TOX), Artemis Resources Ltd (ARV), Apollo Consolidated Ltd (AOP), Vault Intelligence Ltd (VLT), Fleetwood Corp Ltd (FWD), DTI Group Ltd (DTI), Calima Energy Ltd (CE1), Austal Ltd (ASB), Indoor Skydive Australia (IDZ), OZ Minerals Ltd (OZL), NorWest Energy Ltd (NEW), Berkut Minerals Ltd (BMT), Draig Resources Ltd (DRG)

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